Indian Furniture Market – Online, Offline

Industry estimates show that furniture market has an overall market size of Rs.120,000 crores and home decor and utilities is at Rs.130,000 crores. According to a Redseer Consulting report, by 2020, India’s furniture industry is expected to grow to $35 billion, with the online section being worth about $700 million. The Indian furniture market has grown at a CAGR of 17.2% for the period FY’2008-FY’2013 and is projected to grow at a CAGR of around 26% during 2014-19 according to “India Furniture Market Forecast & Opportunities, 2019”.

The furniture sector in India makes a marginal contribution to the Gross Domestic Product (GDP), representing about 0.5 percent of the total GDP. The major part of this industry, approximately 85 percent is in the unorganized sector. The remaining 15 percent of organized sector comprises of large manufacturers, such as Godrej & Boyce Manufacturing Co. Ltd., BP Ergo, Featherlite, Haworth, Style Spa, Yantra, Renaissance, Millennium Lifestyles, Durian, Kian, Tangent, Zuari, PSL Modular Furniture, Furniturewala and Truzo. A small emerging segment is the contribution from online retailers such as Pepperfry, Urban Ladder, HomeLane and others.

Demand Segments

Domestic home furniture comprises of 65% of the Indian furniture demand, followed by office furniture comprising of 20% and contract furniture comprising of 15% demand. The contract furniture is primarily for hotels and this sector has seen strong growth in the last two years. There are around 1200 hotels in India with more than 10% in the five star category as mentioned below.

Different types of wood used by Indian manufacturers

Wood accounts for 65% of all furniture made in India, followed by metal and plastic at 25% and 10%. India abounds in natural resources of several tree species and the industry uses both indigenous wood and imported wood (in cases of short supply in the domestic market). Walnut, Sandalwood, Teak, Sheesham, Deodar, Ebony, Redwood, Rosewood, Red Cedar and Sal. Teak accounts for almost 50 percent of the total wooden furniture produced, Sal and Deodar account for about 20 percent and the balance includes Mahogany, Cedar, and other tree types. Bamboo Material Boards (BMB) are increasingly being used in place of plywood. India also has abundant rubber wood supply. Natural rubber plantations cover 520,000 hectares with an additional 6,000 hectares being replanted almost every year since 1994. The southern state of Kerala produces 95 percent of the total supply of rubberwood in India. MDF boards are imported from Europe, soft and hardwood are imported from Russia and other South East Asian countries. Veneered panels are becoming increasingly popular in India and are imported from the European Union, Canada, and USA. In the recent years, molded plastic, wrought iron, board and bamboo furniture too have been widely purchased by the households in India.

Retailing – Offline & Online

In order to cater to the rising requirements of online shopping in the country, a number of companies have stepped afoot in the online channel of furniture market in the last few years. For instance, leading offline retailer of readymade furniture products named @Home, which is a flagship brand of Nilkamal Pvt. Ltd. has launched its online shopping portal for the exclusive range of @Home furniture, furnishings, and home decor items. Catering to the urban demands for latest and trendy designs, Urban Ladder, Pepperfry, Livspace have seen a huge growth across categories. The emergence of rental commerce driven by Furlenco, Rentomojo, GoZefo and others is building up the organized sector for furniture in an otherwise dominated by local small furniture retailers.

The share of furniture in e-commerce is still very low – according to RedSeer consulting, mobile phones and fashion accounted for 42% and 20% of the overall e-commerce sale in 2016 and furniture only accounted for 1-1.5% of the overall e-commerce sales in 2016. One of the major challenges for online retailers is still the supply-chain costs of storing and moving large boxes of furniture which are not easily stackable in the warehouses and prone to damages. Lack of brands, supply chain complexity, high storage and delivery costs and abundant local suppliers makes this category a difficult category to retail online vs. offline with a geographical captive customer base. This drove a lot of online retailers to shift their focus to home furnishing and home decor categories. A few months ago, ecommerce market leader Flipkart re-launched the furniture category at scale and also unveiled a furniture private label, Perfect Homes. They provide bedsheets and other décor items under another private label, Flipkart Smartbuy. Similarly, the popular online marketplace Pepperfry is shifting its focus to home decor and furnishing from furniture to drive profits. Most of the retailers take the private label route in this category in the absence of established brands and the increased penetration of local players.

Conclusion

The Indian furniture market is largely unorganized and dominated by small local players. However, the market is witnessing an increase in the contribution from organized sector across demand segments. The entry of global players such as IKEA in India will further this trend for organized retail sector consolidation and backward integration with manufacturers and raw material suppliers, driving the entire value chain towards organized retail.